October 12, 2004 12:23 PM PDT

Will your phone become your credit card?

Motorola and MasterCard are at work on cell phones capable of secure financial transactions, such as banking or buying groceries with a credit card, the two companies said Tuesday.

Later this year, a few hundred U.S. residents will be testing two such product lines made by Motorola that use MasterCard's PayPass wireless payment system, according to Motorola.

The Motorola-MasterCard phones will have "the potential to be lifestyle-changing--in essence, your phone will become your wallet, key chain and your ID," Ron Hamma, a Motorola vice president, said in a statement.

The promised handsets, and the surrounding hype, revisit an idea that was much talked about a decade ago--that consumers could make purchases with cell phones rather than carrying cash, coins, credit cards and bank cards. Instead of having to reach for a wallet or purse, the thinking goes, consumers could wave cell phones over wireless readers, similar to the way a grocery store cashier scans items.

The idea fizzled because wireless data networks were, at the time, too slow and porous. But both Motorola and MasterCard said new technologies developed over the last few years have changed the situation for the better.

Motorola will outfit the phones with Near Field Communication, a powerful and secure wireless signal with a range of just 8 inches. NFC is used in "contactless" credit card readers, which are replacing traditional readers that require cards to be swiped, or gobbled up and spat out.

MasterCard conducted a nine-month trial of the technology, using phones from Nokia, last year in the Dallas area. These phones required an attachment with the PayPass chips inside. The Motorola phones will have the chips embedded, said Oliver Steeley, a MasterCard vice president.

At the same time, wireless carriers are showing new interest in what's known as "mobile commerce." Verizon Wireless has said it will let customers bill transactions made using a cell phone's Net connection directly to a subscriber's Verizon account, instead of a credit card or bank account. Wireless messaging specialist Netpace, which created the technology behind Verizon's service, is currently in talks with Cingular Wireless, AT&T Wireless and Sprint, according to Netpace Chief Executive Vajih Khan.

 

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